Every word and every method, in plain language.

Edge

A test result strong enough to count: a t-value of 2 or more over at least 8 periods that do not overlap.

Weak, No edge, Against

Results short of an edge. Weak: pointing the expected way, but not strongly enough. No edge: nothing to see. Against: clearly the opposite of what was expected.

t-value

The average result divided by how much it varies from period to period. The larger it is, the less likely the result is luck.

Periods that do not overlap

Two one-month results that share days are not two pieces of evidence. We count only periods that stand apart.

Top third against bottom third

Each period the shares are ranked on a signal. We compare what the highest third earned with the lowest.

Standing

A company's rank among the index members of the day. 1 is the best of the day, not a perfect company.

Quality checks

Ten fixed yes/no standards, the same for every company on every day.

Group

Where a share or sector stands in a ranking: highest, upper, middle, lower or lowest group of the day.

India VIX

The volatility the option market expects for NIFTY 50 over the next month, as a yearly figure.

Put-call ratio

Open put contracts for each open call contract.

Max pain

The index level at which option buyers of the nearest monthly expiry would lose the most. It describes positions; it is not a forecast.

Breadth

How many of the 50 shares take part in a move: shares up and down, and the share of them above their own average price.

Delivery

The part of a day's traded shares that was really delivered, not bought and sold again within the day.

Return on equity

15 % or more - for every company

Return on equity, 5-year average

15 % or more - for every company

Return on capital employed

15 % or more - for companies other than financial ones

Return on assets

1 % or more - for financial companies

Revenue growth a year, 5 years

10 % or more - for every company

Profit growth a year, 5 years

10 % or more - for every company

Profit against a year ago

higher - for every company

Debt to equity

1 or less - for companies other than financial ones

Interest cover

3 times or more - for companies other than financial ones

Cash from operations to profit

0.8 or more - for companies other than financial ones

Gross bad loans

3 % or less - for financial companies

Net bad loans

1 % or less - for financial companies

Gross bad loans against a year ago

not higher - for financial companies

Promoter shares pledged

10 % or less - for every company

A company's mark is the number of its checks passed. A check without a figure is not counted.

Return on equity

Profit of the last four quarters as a share of shareholders' funds.

Return on capital employed

Profit before interest and tax of the last four quarters against equity plus debt.

Operating margin

Operating profit of the last four quarters as a share of revenue.

Net margin against 3 years ago

Net margin of the last four quarters minus the same three years earlier.

Return on equity, 5-year average

Average of the return on equity over the last five years (at least four).

Return on equity, weakest point in 5 years

The lowest four-quarter return on equity of the last five years: how bad a bad year was.

Return on capital employed, 5-year average

Average of the return on capital employed over the last five years (at least four).

Net margin against 5 years ago

Net margin of the last four quarters minus the same five years earlier.

Return on assets

Profit of the last four quarters as a share of total assets.

Operating profit to assets

Profit before provisions of the last four quarters as a share of total assets.

Return on assets, 5-year average

Average of the return on assets over the last five years (at least four).

Revenue growth, 1 year

Revenue of the last four quarters against the four before.

Profit growth, 1 year

Profit of the last four quarters against the four before.

Revenue growth a year, 3 years

Yearly growth rate of four-quarter revenue over three years.

Profit growth a year, 3 years

Yearly growth rate of four-quarter profit over three years.

Revenue growth a year, 5 years

Yearly growth rate of four-quarter revenue over five years.

Profit growth a year, 5 years

Yearly growth rate of four-quarter profit over five years.

Steadiness of growth

Share of the last eight quarters in which revenue and profit grew on the year.

Debt to equity

Borrowings against shareholders' funds; lower is safer.

Debt to equity against 5 years ago

Debt to equity now minus five years earlier; a fall is better.

Interest cover

Profit before interest and tax against the interest paid, last four quarters.

Cash conversion

Operating cash flow against profit over the same months.

Free cash flow margin

Operating cash flow minus capital spending of the last full year, as a share of revenue.

Piotroski score (8 tests)

Eight yes/no tests of profit, cash, debt, share count, margin and efficiency against a year ago.

Gross bad loans

Gross non-performing assets as % of advances; lower is better.

Net bad loans

Net non-performing assets as % of advances; lower is better.

Gross bad loans against a year ago

Change of the gross bad-loan ratio over four quarters, in percentage points.

Provisions against operating profit

Share of the last four quarters' operating profit set aside as provisions.

Price to earnings

Price against the earnings per share of the last four quarters; lower is cheaper.

Price to book

Price against shareholders' funds per share; lower is cheaper.

P/E against its own 5 years

Where today's P/E stands among its own values of the last five years (0-100).

P/B against its own 5 years

Where today's P/B stands among its own values of the last five years (0-100).

Dividend yield

Dividends of the last 12 months as a share of the price.

Promoter shares pledged

Pledged or encumbered promoter shares as % of all shares; lower is better.

Promoter holding against a year ago

Change of the promoters' holding over four quarters, in percentage points.

Institutions, last quarter

Change of the holding of foreign and domestic institutions over one quarter.

Institutions, 1 year

Change of the holding of foreign and domestic institutions over four quarters.

Tone of the last results

Average tone of the last four results filings: positive 1, neutral 0.5, cautious 0.

One-off items in profit

Exceptional items of the last four quarters against profit before tax; lower is cleaner.

Delivery spike

The share of traded stock taken for delivery is 2.5 standard deviations above its 20-day average. Read as investors, not day traders, behind the day's trade.

Long build-up, three days running

Price and futures open interest both rise for three days. Read as fresh long positions being added.

Short build-up, three days running

Price falls and futures open interest rises for three days. Read as fresh short positions being added.

FII index futures unusually long

The long share of foreign institutions in index futures enters the top 10 % of its history. Read as crowded optimism; often a contrarian caution.

FII index futures unusually short

The long share of foreign institutions in index futures enters the bottom 10 % of its history. Read as crowded pessimism; often a contrarian positive.

MACD crosses above its signal line

The MACD line crosses above its 9-day signal line. Read as momentum turning up; more reliable in the direction of the main trend.

MACD crosses below its signal line

The MACD line crosses below its 9-day signal line. Read as momentum turning down.

RSI leaves the oversold zone

RSI 14 rises back above 30. Read as selling pressure easing after a sharp fall.

RSI falls into the oversold zone

RSI 14 falls below 30. Read by contrarians as stretched to the downside; in a strong down-trend it can stay there.

RSI rises into the overbought zone

RSI 14 rises above 70. Read as stretched to the upside; in a strong up-trend it is a sign of strength instead.

RSI leaves the overbought zone

RSI 14 falls back below 70. Read as buying pressure easing after a sharp rise.

Momentum rising

MACD histogram positive and larger than three days ago. MACD histogram positive and larger than three days ago.

Momentum fading

MACD histogram positive but smaller than three days ago. MACD histogram positive but smaller than three days ago.

Momentum recovering

MACD histogram negative but less so than three days ago. MACD histogram negative but less so than three days ago.

Momentum falling

MACD histogram negative and more so than three days ago. MACD histogram negative and more so than three days ago.

New 52-week high

The highest close in a year, the first in 20 trading days. Read as strength: there are no trapped buyers above.

New 52-week low

The lowest close in a year, the first in 20 trading days. Read as weakness; contrarians watch for exhaustion.

Gap up of 3 % or more

The open is at least 3 % above the previous close. Read as strong overnight news; the question is whether the gap holds.

Gap down of 3 % or more

The open is at least 3 % below the previous close. Read as bad overnight news; sharp gaps sometimes reverse.

Golden cross

The 50-day average crosses above the 200-day average. Read as the start of a long up-trend. It is slow: much of the rise is already behind.

Death cross

The 50-day average crosses below the 200-day average. Read as the start of a long down-trend. Often arrives after most of the fall.

Close back above the 200-day average

The close crosses above its 200-day average. Read as the long-term trend turning up.

Close below the 200-day average

The close crosses below its 200-day average. Read as the long-term trend turning down.

Up-trend gains strength

ADX rises above 25 while +DI is above -DI. Read as a trend, not a range: pullbacks tend to be bought.

Down-trend gains strength

ADX rises above 25 while -DI is above +DI. Read as a trend, not a range: rallies tend to be sold.

Strong up-trend

Close above the 50-day average, which is above the 200-day average, and ADX above 25. Close above the 50-day average, which is above the 200-day average, and ADX above 25.

Up-trend

Close above both the 50-day and the 200-day average. Close above both the 50-day and the 200-day average.

Sideways

Close between its 50-day and 200-day averages: no clear trend. Close between its 50-day and 200-day averages: no clear trend.

Down-trend

Close below both the 50-day and the 200-day average. Close below both the 50-day and the 200-day average.

Strong down-trend

Close below the 50-day average, which is below the 200-day average, and ADX above 25. Close below the 50-day average, which is below the 200-day average, and ADX above 25.

Breakout up from a squeeze

The close moves above the upper Bollinger band within 5 days of an unusually narrow band. Read as the start of a move after a quiet spell.

Breakdown from a squeeze

The close moves below the lower Bollinger band within 5 days of an unusually narrow band. Read as the start of a fall after a quiet spell.

Volume spike on an up day

Volume is 2.5 times its 20-day average and the close is up. Read as large buyers at work.

Volume spike on a down day

Volume is 2.5 times its 20-day average and the close is down. Read as large sellers at work, or as a selling climax.